The Forrester/ITAA Tech Sector Index — which measures the health of the US technology industry — reached its highest level in five and a half years in Q4 2006, rising two points to 128.8. The latest quarterly index from Forrester Research, Inc. (Nasdaq: FORR) and the Information Technology Association of America (ITAA) indicates continued slow but steady gains for the US tech sector in 2007.
“The financial performance of US technology vendors last quarter helped push the Index higher,” said Forrester Analyst G. Oliver Young. “Stock prices were up across the board at the end of 2006, and net income for the 22 major US tech vendors that Forrester monitors reached $13.2 billion, the highest quarterly level since we began tracking. But foreign sales — not domestic demand — is driving vendor revenues and profits.”
“The IT industry is thriving on a global stage and driving value at home,” said ITAA President and CEO Phil Bond. “Every high school graduate should know that IT employment is at its strongest in four years and spending forecasts signal a continued climb for demand in the US market.”
Q4 2006 Results
The Index is based on 11 indices measuring IT demand, IT supply, and the financial strength of US-based vendors. All of the indices are weighted evenly in the overall Index score, which uses a 2002 quarterly average of 100 as the baseline. In Q4 2006, seven of the 11 indices were up. The two point increase in the Index compares with a 3.7-point gain in Q3. Highlights include:
- As indicated above, vendor financial performance was the primary driver lifting the Index. The stock price component of the Index jumped 16.2 points, reflecting the broad rise in the stock market at the end of last year. The vendor profit component of the Index grew 10.9 points for the quarter.
- US demand for tech products and services grew 2.5 points, based in part on continued optimism of spending forecasts by CIOs surveyed by Forrester.
- IT industry employment edged up slightly, gaining 11,700 tech sector jobs. Employment now stands at the highest level since the close of 2002.
- After falling 9.4 points in Q3, venture capital investment plunged an additional 20.8 points in Q4 — a quarter-on-quarter drop of $711 million.
The report “Forrester/ITAA US Tech Sector Index: Q4 2006” is currently available to Forrester RoleView™ clients and can also be purchased directly at: http://www.forrester.com/Research/Document/Excerpt/0,7211,41899,00.html
The Information Technology Association of America (ITAA) provides global public policy, business networking, and national leadership to promote the continued rapid growth of the IT industry. ITAA consists of more than 325 corporate members throughout the US, and a global network of 70 countries’ IT associations. The Association plays the leading role in issues of IT industry concern including information security, taxes and finance policy, digital intellectual property protection, telecommunications competition, workforce and education, immigration, online privacy and consumer protection, government IT procurement, human resources and eCommerce policy. ITAA members range from the smallest IT startups to industry leaders in the Internet, software, IT services, ASP, digital content, systems integration, telecommunications, and enterprise solution fields. For more information, visit www.itaa.org.